FINANCIAL ANALYSIS

REPORT
MEKONG FISH Joint Stock Company
(AAM)

Lecturer:
Class:
Financial Analysis

INTRODUCTION
 BASIC INFORMATION

Name of Company MEKONG FISHERIES JONT STOCK COMPANY

Abbrevition AAM

Address 24 Tra Noc Industrial Zone, Binh Thuy District, Can

Tho City.

Phone 0710. 3841294 – 3841990 – 3842027 - 3841560

Tax 0710. 3841192 - 3843236

Email 1.mkf@hcm.vnn.vn
2.salemekongfish@vnn.vn
3.mkfmekonscomvn@hcm.vnn.vn

Website www.mekongfish.vn

Tax Code 1800448811

Trading Name MEKONGFISH.CO

Type Of Business Joint Stock Company

Charter Capital 126.358.400.000 VND

Legal Representative Luong Hoang Minh

 MAIN BUSINESS FIELD

 Purchasing, processing and exporting agricultural products.
 Importing fertilizers and products of animal feed, aquatic food for
aquaculture.

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Financial Analysis

 HISTORY

Established Hau Giang Frozen Vegetables and

04/1979
Fruits Enterprise.

1979 → 1990 Vegetable and fruit processing enterprise

The company switched to processing seafood for

1991→ 1996
exporting.

Renamed as Can Tho Agricultural Product

1997→ 2001
Processing Enterprise

Established Mekong Fisheries Joint Stock

Company.
26/02/2002
Listed and traded for the first time at Ho Chi Minh
City Stock Exchange with the code named AAM.

 ACHIEVEMENT:

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Financial Analysis

LIST OF TABLES

TABLE 1 ASSET STRUCTURE ANALYSIS ................................................................. 28

TABLE 2 SOURCE OF FUND ANALYSIS.................................................................... 30
TABLE 3 LONG-TERM FINANCIAL BALANCE ........................................................ 30
TABLE 4 SHORT-TERM FINANCIAL BALANCE ...................................................... 31
TABLE 5 ANALYSIS OF ASSETS USE EFFICIENCY ................................................ 32
TABLE 6 PROFITABILITY ANALYSIS........................................................................ 33
TABLE 7 RETURN ON SALES ...................................................................................... 34
TABLE 8 CASH FLOW BASED RATIO ........................................................................ 34
TABLE 9 BUSINESS RISK ANALYSIS ........................................................................ 35
TABLE 10 FINANCIAL RISK ANALYSIS .................................................................... 35
TABLE 11 INSOLVENCY RISK ANALYSIS ................................................................ 36
TABLE 12 INTEREST COVERAGE RATIO ................................................................. 36

LIST OF FIGURES

Figure 1 THE RATE OF EXPLOITATION OF AQUACULTURE AND MARINE

PRODUCTS OF VIETNAM FROM 1995 TO 2017 ........................................................ 10

LIST OF CHARTS

CHART 1 ASSET STRUCTURE ANALYSIS ................................................................. 29

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CONTENT

INTRODUCTION .............................................................................................................. 1
LIST OF TABLES .............................................................................................................. 3
LIST OF FIGURES ............................................................................................................ 3
LIST OF CHARTS ............................................................................................................. 3
CONTENT .......................................................................................................................... 4
1. INDUSTRY ANALYSIS ............................................................................................ 6
1.1 Strategy Analysis ...................................................................................................... 6
1.1.1 Politics .............................................................................................................. 6
1.1.2 Economics ........................................................................................................ 7
1.1.3 Social ................................................................................................................ 8
1.1.4 Technology ....................................................................................................... 8
1.1.5 Legal factors ..................................................................................................... 8
1.1.6 Environmental factors ...................................................................................... 8
1.2 Industry Structure and Profitability Analysis ........................................................... 8
1.2.1 Competitive Force 1: Rivalry Among Existing Firms ........................................ 9
a. Higher degrees of competition among firms .................................................... 9
b. Determinants of the intensity of competition among firms .............................. 9
1.2.2 Competitive Force 2: Threat of New Entrants .................................................. 11
1.2.3 Competitive Force 3: Threat of Substitute Products ......................................... 13
1.2.4 Competitive Force 4: Bargaining power of buyers ........................................... 13
1.2.5 Competitive Force 5: Bargaining power of suppliers ....................................... 13
2. FINANCIAL STRUCTURE ANALYSIS .............................................................. 14
2.1 Asset structure analysis .......................................................................................... 14
2.2 Source of fund analysis .......................................................................................... 15
2.3 Long-term financial balance ................................................................................... 16
2.4 Short-term financial balance................................................................................... 17
3. OPERATIONAL EFFICIENCY ANALYSIS ....................................................... 17
3.1 Assets use efficiency .............................................................................................. 17
3.2 Fixed assets turnover .............................................................................................. 18
3.3 Current assets turnover ........................................................................................... 18
3.4 Return on sales (ROS) ............................................................................................ 19
3.5 Return on assets (ROA) .......................................................................................... 20
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Financial Analysis

3.6 Profitability Analysis .............................................................................................. 20

3.7 Cash flow based ratio ............................................................................................. 22
4. THE RISK ANALYSIS ............................................................................................ 23
4.1 Business risk analysis ............................................................................................. 23
4.1.1 Qualitative analysis: ....................................................................................... 23
4.1.2 Quantitative .................................................................................................... 23
4.2 Financial risk analysis ............................................................................................ 24
4.3 Insolvency risk analysis ....................................................................................................................24
5. SOLUTION ........................................................................................................................................ 26
APPENDICES ................................................................................................................... 28

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Financial Analysis

1. INDUSTRY ANALYSIS

1.1 Strategy Analysis

1.1.1 Politics

The Government enforces many supporting policies and solutions which facilitating
export activities in seafood industry such as the program developing aquaculture in the
period of 2000-2010 including profit tax incentives of 15% during the firm’s lifetime,
salary incentive policy in the labor law, tax rate 0% for seafood items in tariffs and so on.
Therefore, it creates favourable conditions and encourages many investors to enter into
the seafood industry.

Environmental laws: There has been many enounced laws, however, the
implement is still weak, leading to many unfortunate cases such as the Formosa scandal.
This incident has led to water pollution, which has caused adverse impacts on businesses
and households in aquaculture industry.

Trade restriction: Protecting consumers is the most important target of building

trade restriction. Therefore, foreign firms like us must meet other countries’ standards
about quality and quantity, which creates more pressure on our business management. On
the other hand, protecting domestic businesses against foreign firms is also one of the
main purposes of setting trade restriction inside the country.

Political stability: Political stability is one of the strengths of Vietnam. In general,

over the past ten years, the Government has done many things that can maintain political
stability, which helps to attract many foreign investors and promote the economic
development. Therefore, it brings many benefits to the domestic businesses. However, it
still takes place the territorial dispute with China and the surrounding areas.

Furthermore, Vietnam has a high corruption levels and compared to the other Asian
countries, Vietnam fell behind regarding control of corruption.

As a whole, the political landscape is quite favorable.

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1.1.2 Economics

In recent years, aquaculture industry has had significant development with the
highest growth rate. Vietnam is also one of the ten largest seafood exporters in the world.

Economic growth: In 2018, GDP grew by 7.08 percent - the highest in the past 11
years and agro-aqua-forestry sector has achieved the highest growth rate in the last 7
years, which means that the restructuring of the industry has been effective. In addition, it
means that the standard of living and demands in food have changed, particularly
products are benificial for the health.

Input market (domestic): the input components serving production become

increasingly up such as: the interest rate is over 20%, oil prices and electricity prices are
high, and so on. These components lead to the higher production expenses, cause many
difficulties and disadvantages for businesses.

Output market: the aquacultural exporters in Vietnam are likely to face many
barriers about technique and quality of productions. Following Food and Agriculture
Organization of the United Nations - FAO, aquaculture is currently the most consumed
food item and this is a great potential market.

Besides, the inflation rate tends to increase, people has a tendency to save rather
than consume. So, it can lead to a decrease in the profit of enterprises.
Exchange rate: in Vietnam, it operates floating according to the state-controlled
market mechanism, thus greatly influenced by foreign currency supply and demand
relations in the domestic. This mechanism is more and more flexible, creating conditions
for enterprises to prevent risks of exchange rate fluctuations as well as to ensure
production and business efficiencies.

In general, economic landscape is quite unfavorable.

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1.1.3 Social

The cultural aspects and health consciousness: In general, the demand for
seafood products is increasing. And the trend and taste of consumers for its have a
constant change. For instance, instead of buying the fresh fish at market, consumers tent
to buy seafood products, that ensures the quality and food Hygiene and Safety, the
obvious origin, can be preserved for a long time. Moreover, they are also interested in the
composition and nutrition of products.

In fact, social landscape is quite favorable.

1.1.4 Technology

There is a wide range of new technologies that can be applied to fisheries industry.
However, these applications are not easy because the costs are quite high. Therefore, it is
not a favorable condition for the firm.

1.1.5 Legal factors

In Vietnam, there are applied consumer laws, labor laws, etc but the implement is
quite weak, especially safety standards. Therefore, the current firms might underestimate
the importance of safety to the labour force and business processes, which can cause
damages to both people and business operation.

1.1.6 Environmental factors

Vietnam has a wide range of advantages to develop aquaculture: long coastline,

diverse kinds of water environment, huge seafood reserves with many different kinds, etc
which creates competitive advantage compare to other countries. Therefore, aquaculture
plays a important part in the economy, which brings many benefits to the firms in this
industry. They can get many support from the Government.

1.2 Industry Structure and Profitability Analysis

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Financial Analysis

1.2.1 Competitive Force 1: Rivalry Among Existing Firms

a. Higher degrees of competition among firms

In reality, it is likely to face the higher degrees of competition among firms such as
pushing prices towards the marginal cost of production, making non-price dimensions of
products or services more important. However, Mekong Fish Co. is regarded as a
significant position in a few segments regardless of the development of the powerful
company in the aquaculture industry (BENTRE aquatic product import and export joint
stock company, Minh Phu Seafood Corporation and so on). This is because the quality in
the production of Mekong Fish Co. creates the definitely belief of consumers.

b. Determinants of the intensity of competition among firms

- Industry growth rate:

The coastline of exclusive economic zone and the vast marine biodiversity brings
the aquatic industry becoming a key industry with high export value and huge foreign
exchange earning.

Our country with a dense network of rivers and seas has developed favorable long
fishing activities and aquaculture. Our aquatic production has maintained continuous
growth in 22 years with an average increase of 9,07%. With the policy of promoting the
development of the activities of aquaculture, the development of production has been
continued increasing in recent years, which is averaged about 12,77%.

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Figure 1 The rate of exploitation of aquaculture and marine products of Vietnam from
1995 to 2017

Combining chart on the report of the General Fisheries shows the 2017 total
output of aquatic products reached more than 7,28 million tones up 5,6% compared to
2016 include aquaculture production mining was nearly 3,42 million ton increase 57% of
aquaculture production of 3,86 million tons on increased 5,5% farming area 1,1million
hectares. Proportion of aquaculture production accounted for 53,0% of total output (2016
is 54,2 %).

With favorable geographical location to the fisheries sector in our country is

growing strongly and are concentrated in the North Central area as large as the South
Central Coast Central Southeast and Mekong Delta.

Besides these advantages to develop the fisheries sector, it also has a lot of
difficulties such as competitions and economic barriers. Agricultural products with
seafood items with each other stiff competition in the market to take advantage.

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Financial Analysis

- Concentration and balance of competitors:

 Direct competitors: about over 20 competitors on HOSE and HNX such as
Saigon Seafood, JSC Minh Phu Seafood Corporation, Vinh Hoan Joint Stock Company ,
Hung Vuong Corporation, An Giang Fisheries Import Export Join Stock Company, Bac
Lieu Fisheries Join Stock Company, Nam Viet Co., Hoang Long Co., etc.
 Indirect competitors: is the conflicts between vendors whose products are
not the same but that could satisfy the same consumers’ needs such as Ha Long canned
food Co., Dabaco Co., Nafoods Group, Nam Dinh Food, etc.
- Degree of differentiation in products and services and Switching costs: The
differentiation is quite low because there are many competitors in this industry. Therefore,
the switching cost is low. Customers easily consume other brands or substitute products.
- Scale economies and ratio of fixed to variable cost: Scale economies refers to
reducing cost per unit that arise from the increase in total output of one product. Fixed
expenses account for a great amount in cost structure compared to variable cost, which
means the ratio of fixed to variable costs is high. Therefore, they try to increase the
volume to earn higher income.
- Excess capacity: Aquatic products are nutritious source of food and favored by
many countries in the world. Thus, the export of aquatic products increases and
contributes to the development of aquatic products and revenue.
- Exit barriers: Cost of the resources that businesses waste to retire from the
industry creates exit barriers.

1.2.2 Competitive Force 2: Threat of New Entrants

It can be said that the pressure from the side of new entrants is quite low.

Although this industry is able to have a few competitors, Mekong Fish Co. still have
to judge sensitively many firms that have ability to take part in this industry and create
more new competitions, new challenges. Threat of new entrants depends on the current
entry barriers. The barriers have become more and more prevalent and the factors
affecting the barriers to entry are as follows:
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Financial Analysis

Economies of scale: refer to reducing cost per unit that arise from the increase in
total output of one product. It significantly affects the advantages of the current firms
compared to the new companies. In the production and distribution, the new competitors
have trouble in profitability due to the difference between the selling prices and expenses.
This is because they lack of experience, which may lead to the ineffective cost
management.

The capital requirement: In reality, aquaculture industry is a manufacturing

industry that the proportion of investing fixed assets occupies 70-80 % from the long-term
capital. High capital demand creates barrier for new firms to enter to this industry.

Entering in the distribution system: The success of this industry requires a strong
distribution channels, which new enterprises have difficulty in building due to the
exclusive distribution contract. It is quite hard to have a distributed position in restaurant
or a in counter in supermarkets because there are many powerful businesses want those
positions.

The first mover advantage: is the advantage gained by the initial significant
occupant of a market segment. New firms enter to this industry when it’s already had
many other companies. Therefore, there is no the first mover advantage.

Relationships with suppliers and customers: It is obvious that the new entrants
will not have the customers’ trust. Due to the food section, it seems probable that the
customers tend to adhere certainly with prestigious firms (have a certificate of food safety
conditions). Reaching a special position in customers’ trust is considered to be a big
challenge for new entrants.

Legal barriers: At recent years, the government has enacted many laws and
regulations in industry such as Code of Conduct for Responsible Fisheries (CCRF), Code
of Practice for Fish and Fishery Products, Certificate of Food Safety conditions and so on.
Therefore, businesses have to tighten the business process to minimize the ability to break
the rules, which may lead to some difficulties in operating the business.

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Financial Analysis

In addition, it remains the other factors affecting the barriers such as the limit from
the investment distribution, the new product development, cost in the product
convention, effect on the anti-dumping cases and so on.

Without these barriers, the competitions have become increasingly fierce.

1.2.3 Competitive Force 3: Threat of Substitute Products

Substitute products are those products that can meet the same needs compared to the
current product, giving consumers the same features and benefits as the products of the
business. Substitute products will be prioritized for meat such as pork, chicken, beef, etc
will be most interested by customers when there are water pollution. For products with
high prices, customers will choose products with more affordable prices and equivalent
nutrition value. In addition, export of white leg shrimp, tiger shrimp, tra fish, tuna, other
fish, bivalve mollusks, squid, octopus should meet many substitutes: fish and lobster in
Canada; American catfish, tilapia; Marble, red tilapia, Taiwan, etc.

1.2.4 Competitive Force 4: Bargaining power of buyers

Buyers are one of the most direct factors affecting businesses and they directly
affect the revenue of one business. The changing economic environment and the increase
of available aquatic products have led to a higher bargaining power among buyers.
Everyone is looking for the most affordable price of available aquatic products. Basically,
customers do not require special customizations so they are more likely to switch to
another product with low switching cost. This is because there are many similar and
available products in supermarkets. This also lead to the high price sensitivity of
customers. If price increases, customers are more likely to consume other brands or
substitute products. As a result, it put more pressure on the company to reduce the price.

1.2.5 Competitive Force 5: Bargaining power of suppliers

MeKong Fish Co.’s main activities are aquaculture and exporting their own
products. They mainly have suppliers of their chemicals and special machines for
processing aquatic products. Therefore, suppliers of this company have bargaining power
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because: First, there are no substitutes for chemicals and machines and few suppliers
relative to the number of customers demanding those products, which means high
concentration of suppliers. In addition, actually, those suppliers have Differentiation of
their products and do not rely on high volumes so they cannot be threatened by the
decrease in volumes if MeKong Fish Co. stop consuming their products.

 In conclusion, profitability of this industry is quite high if the companies

take advantage of scale economies as well as better cost management.

2. FINANCIAL STRUCTURE ANALYSIS

2.1 Asset structure analysis

Overall, it is clearly seen that total assets tended to increase from 2014 to 2015, but
between 2015 and 2018, there was a downward trend in assets of company; and the
majority of assets were the current assets. In comparison to long-term assets, the short-
term assets was always nearly 4 times.
From the Chart 1.2, the percentage of the current assets to total assets had a
fluctuation over the years, with the highest being 84,03% in 2015, and the lowest being
78,03% in 2017. In addition, there was also oscillations in almost the items of the short-
term assets.
As can be seen from Table 1, in thee first years, inventories had a great proportion of
current assets (made up roughly a half). Interestingly, short-term financial investments
replaced this position in both 2017 and 2018, which indicates that the firm may give less
concentration on manufacturing activities and expand short-term finance. However, it
could lead to the terrible risk in fund collections. Besides, cash and cash equivalents
almost had a decrease trend from nearly 19% in 2014 to just under 5% in 2018, whereas
other current assets fluctuated slightly over the period, approximately 5% and 2%,
respectively. Therefore, the liquidity of the company was not high and the asset
management was not that effective. A positive point is that the amount of money in short-

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term accounts receivable showed a downward trend, from 26% to 13% in three last years,
which means the firm has effective debt management or may tighten credit terms.
Next came long-term assets of MEKONGFISH CO., fixed assets is a crucial part
with the highest rating (more than 60% of long-term assets). However, compared to total
assets, fixed assets only constituted a modest proportion. It means that the manufacturing
capability of AAM is likely to be still low. Regarding long-term financial investments, the
figure witnessed an substantial upturn from 3,6% to 8,22% between 2014 and 2017,
whereas in 2018, this amount dropped by a half (4,65%). Additionally, long-term work in
process accounted for a tiny percentage of the total, just under 1%, which shows that the
company may achieve efficiency in manufacturing.

2.2 Source of fund analysis

350,000,000,000

300,000,000,000

250,000,000,000

200,000,000,000

150,000,000,000

100,000,000,000

50,000,000,000

0
2014 2015 2016 2017 2018

Liabilities Owner's equity

The table 2 shows that the value of both liabilities and owner’s equity sharply
fluctuated over the period. Between 2014 and 2017, there were a growth trend to 22,45%
in proportion of debt ratio, then the percentage fall significantly to just over 4%, and rose
moderately to nearly 8% in the last year. In contrast to debt ratio, self-fund ratio began
over 86% in 2014 and went up 92% in 2018. In simpler terms, $100 of assets is
segregated into $8 from debt and $92 from owner’s equity. It is clear that financial

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Financial Analysis

autonomy of AAM was extremely good, which created a belief for investors and
creditors. However, beacause the debt ratio was too low, the company was not able to get
benefit from financial leverage.
There was a remarkable fluctuation in both long-term and temporary resources.
Temporary resource ratio made up a minor percentage in total. The highest proportion of
short-term resource ratio was in two first years and in three last years, there was a slump,
with the lowest proportion being 3% in 2017. In stark contrast, the majority of resources
was long-term resource ratio. It indicates that the level of self-governing in finance was
high and sustainable.

2.3 Long-term financial balance

300,000,000,000

250,000,000,000

200,000,000,000

150,000,000,000

100,000,000,000

50,000,000,000

0
2014 2015 2016 2017 2018

Long-term resource Long-term assets Net working capital

As seen from Table 3, in the last three years, net working capital has positive value
and rate of Long-term resources/ Long-term assets > 1, which indicates that long-term
capital can finance for long-term assets and even finance for a part of short-term assets. It
also shows that the company has high financial stability and financial autonomy (this is
because the rate of owner’s equity/ long-term assets > 1). However, there has been a
slight decrease in net working capital over the past three year, which means the firm are
slowing down a little.

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Financial Analysis

2.4 Short-term financial balance

As seen from Table 4, the positive value of net fund in the five-year period shows
that the remaining net working capital is able to finance for the net working capital
requirement in the short term. The excess can be used to reinvest in order to increase the
efficiency of employed capital. However, there had been a slump (from over 102 billion
VND to nearly 43 billion VND) in 2016 and a rapid growth of net fund in 2017 (roughly
2 times), which indicates the instability of the firm’s activities.

3. OPERATIONAL EFFICIENCY ANALYSIS

3.1 Assets use efficiency

4.50 4.12
4.00

3.50 3.27 Asset use efficiency

3.00
2.56
2.50
2.07
1.88 1.96 Current assets
2.00
turnover
1.39
1.50 1.14 1.14
1.10
1.49
1.00
1.15 Fixed assets use
0.96 0.90 0.94
0.50 efficiency

0.00
2014 2015 2016 2017 2018

As can be seen from the chart, assets turnover fluctuated slightly over the 5-year
period. It decreased from 1,49 times in 2014 to 0,90 times in 2018. This is mainly because
there is a significant decrease in net sales and revenues while average total assets
fluctuates slightly. However, this situation was improved in 2018. Asset use efficiency

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Financial Analysis

increased by 0,04 times compared to 2017, meaning that the company generated a higher
amount of net sales and revenues when using dong of invested assets.

1.60 1.49

1.40
1.15
1.20 1.09
0.96
1.00 0.90
1.04
0.80 0.95 0.91 0.94 AAM
0.89
Industry average
0.60

0.40

0.20

0.00
2014 2015 2016 2017 2018

Compared to the data of industry average, from 2014 to 2016, although there is a
decline in assets turnover of AAM, it is higher than industry average index. In 2017,
assets turnover of AAM is approximately equal to industry average, namely 0,9 times. By
2018, it reached 0,94 times which is lower than industry average. This proves that the
capacity of assets management is regarded as low-grade level and deficiency in this
period.

3.2 Fixed assets turnover

Regarding fixed assets use efficiency, it has a considerable decrease in the period of
5 years, reached at 1,96 times in 2018. While one dong historical cost of fixed assets
rotate 2,07 times in total sales in 2017, this figure in 2018 is just 1,96 times. This lower
index indicates that fixed assets use of company to generate sales is not efficient.

3.3 Current assets turnover

Besides, current assets turnover had a similar trend with assets turnover. Also it
declined by 0,78 times between 2014 and 2017, then increased to 1,14 times in 2018. It

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Financial Analysis

means that in 2018, 1,14 Dong of net sales can be generated using one dong of invested
current assets. The company is likely to have policies to promote and increase efficiency
of inventory or accounts receivables. This is because inventory turnover increased
dramatically from 0,90 to 0,97 in the year of 2017 and 2018. The company might have a
proper choice in current assets investment.

3.4 Return on sales (ROS)

14.00% 12.60%
12.00%

10.00%

8.00%
5.89% AAM
6.00% 5.25%
4.51% Industry average
3.62% 3.63%
4.00% 2.62%

2.00% 0.87% 0.68% 0.51%

0.00%
2014 2015 2016 2017 2018

From the chart, we can see that there was a significant drop in the period 2014-2017
from 2,62% to 0,51%. However, the figure witnessed an exponential growth in 2018 at
5,25%. This figure indicates 5,25 dong of profit before tax in 100 dong of sales and
revenue. It means that in 2018, the company controlled and managed expense better than
2017. It is also related to the revenue-expense management, the pricing policy and the
accounting policy.
Compared to the data of industry average, this ratio is much lower than competitors
in the market. In details, it just reached at 5,25% in 2018, while industry average index is
12,6%.

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Financial Analysis

3.5 Return on assets (ROA)

No. Index 2014 2015 2016 2017 2018

1 ROA 3,91% 1,00% 0,66% 0,46% 4,95%
2 ROE 3,44% 1,01% 0,63% 0,47% 4,24%
3 RE 4,02% 1,34% 0,91% 0,46% 4,95%
From the table, ROA decreased from 3,91% in 2014 to 0,46% in 2017.
Nevertheless, it rocketed to a highest level of 4,95% in 2018. It referred that 100 dong of
the invested assets generated 4,95 of profit before tax. There is a similar trend in return on
assets variation (RE). It decreased by nearly 4% in 2016 compared to 2014. This presents
that although excluding the effect of the funding policy, the asset use efficiency without
the use of debt-equity gradually started to decreased over 3 years. In next 2 years, ROA is
equal to RE because the company did not have interest expense

3.6 Profitability Analysis

No. Index 2014 2015 2016 2017 2018

1 ROA 3,91% 1,00% 0,66% 0,46% 4,95%
2 ROE 3,44% 1,01% 0,63% 0,47% 4,24%
3 RE 4,02% 1,34% 0,91% 0,46% 4,95%
From the table, ROA decreased from 3,91% in 2014 to 0,46% in 2017.
Nevertheless, it rocketed to a highest level of 4,95% in 2018. It referred that 100 dong of
the invested assets generated 4,95 of profit before tax. There is a similar trend in return on
assets variation (RE). It decreased by nearly 4% in 2016 compared to 2014. This presents
that although excluding the effect of the funding policy, the asset use efficiency without
the use of debt-equity gradually started to decreased over 3 years. In next 2 years, ROA is
equal to RE because the company did not have interest expense

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Financial Analysis

16.00%
13.70%
14.00%
12.00%
10.00%
8.00% AAM
6.00% 4.76% 4.95% Industry average
3.81%
4.00% 2.66% 2.96%
3.91%
2.00% 1.00% 0.66% 0.46%
0.00%
2014 2015 2016 2017 2018

In comparison to the data of industry average, it represented that ROA of the

company was quite low in 2018. It's only half the industry average. Therefore, it reflected
the worse effective business capacity, the unreasonable company’s asset management and
the unqualified expense control. It consistently demonstrated that the investment in
business activities is relatively deficiency
For return on equity, it also has a similar trend with ROA. From 2014 to 2017, it
decreased remarkably because profit after tax declined significantly and average total
equity fluctuates slightly. After that, it increased to 4,24% in 2018. This ratio indicates
that 4,24 VND of profit after tax can be created by using 100 VND of shareholder
investments, which results in the increase in the ability of the company to generate profits
from its shareholder investments over times

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Financial Analysis

30.00% 26.71%

25.00%

20.00%

15.00% AAM
Industry average
10.00% 7.75% 6.93%
5.07% 5.86%
3.44% 4.24%
5.00%
1.01% 0.63% 0.47%
0.00%
2014 2015 2016 2017 2018

According to the chart, although it increased from 3,44% in 2014 to 4,24% in 2018,
It is still much lower than the industry average
From the table 3.2, ICR also dropped over 5 years. In 2017 and 2018, the company
did not have ICR index because it did not have interest expense. Besides, return on capital
employed increased from 4,62% in 2014 to 5,19% in 2018, which shows that the
profitability of capital employed became higher

3.7 Cash flow based ratio

No. Index 2014 2015 2016 2017 2018

1 CF margin 0,04 (0,01) (0,01) 0,25 0,08
CF from operations to
2 2,05 (1,00) (1,30) 50,50 1,75
net income
3 CF per share 1832,38 (259,18) (204,83) 5751,02 1683,48
4 CF return on assets 0,06 (0,01) (0,01) 0,23 0,07
Net income to cash
5 provided by operating 0,49 (1,00) (0,77) 0,02 0,57
activities

As can be seen from the table, the CF margin ratio is an important measure of how
efficient a company converts its sales to cash. CF margin is negative in 2015 and 2016 but
increased notably in 2017 (25%) and then in 2018, it decreased to 8%, which indicates
that its free cash flows could create long-term value for shareholders but it is not stable.
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Financial Analysis

The CF from operation to net income fluctuated as the same trend as CF margin does, the
most notably thing is this indicator decreased dramatically in 2018 (from 50,5 to 1,75).
Last indicator, net income to cash operated by operating income fluctuates remarkably in
five year. From 2016 to 2018, it increased dramatically , reaching at 0,57 in 2018. This
figure shows that 100 VND cash provided by operating activities generates over 57 VND
of income.

4. THE RISK ANALYSIS

4.1 Business risk analysis

4.1.1 Qualitative analysis:

Risk of raw materials: Raw materials source of the company comes from the sea;
therefore, it can be adversely affected by water pollution. If there were water pollution,
customers would stop consume agricultural products. It is a risk that the company should
care about.

Risks from competitors: Having many competitors in this industry is considered to

be a concern to the firm. The company has to make every effort to compete with other
firms by increasing the quality of the products and lowering the price, which might put
more pressure on AAM.

Risks from Inventory: The expansion of the company has led to a significant
increase in inventories. This is a considerable problem because most of AAM’s inventory
is raw seafood and they are easily rotten, which requires AAM to preserve them well.

4.1.2 Quantitative

As can be seen from Table 12, DOL increased over the year in 2014-2017 period but
rapidly decreased to 8,25 in 2018. However, this index was at high level, showing that
most of the firm’s cost structure was fixed cost and its profits could be increased
significantly when sales increased.

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Financial Analysis

In 2017 and 2018, the firm had no interest expenses but DOL was very high in 2017.
This is because there were a decrease in CM and profit before tax, showing that the
company did not operate effectively this year. In 2018, this indicator was quite low,
showing that the risk decreased this year but it also means that profits can not be
increased when sales increased as much as it used to be.
4.2 Financial risk analysis

DFL in 2016
Cuu Long An Giang Fish Joint Stock Company 2,4
Ben Tre Fish Joint Stock Company 1,28
Nam Viet Joint Stock Company 1,85
Go Đang Joint Stock Company 2,61
AAM 1,4
Average of Industry 1,908
As can be seen from Table 13, DFL in 2014-2016 period was greater than 1 and
increased over the years, which showed that the company continued borrowing money to
serve their operational purpose and it was able to take advantage of financial leverage.
The firm did not use debt financing in 2017 and 2018; therefore, the degree of
Financial leverage (DFL) equal 1, which means EBIT equal EBT. However, back to
2016, this indicator was 1,4, which shows that if EBT changed 1%, ROE would change
1,4%. Compared to the average index of the industry, AAM financial risk is assessed as
moderate.

4.3 Insolvency risk analysis

4.3.1 Current liabilities coverage ratio

From Table 15, we can see that current ratio in the five-year period is far away from
2, which indicates that the firm’s current assets can finance to current liabilities. Besides,
it decreased considerable in 2018 (from 26 to 12,2) resulting from the increase in current
liabilities. This might because the firm buys more goods from suppliers to expand their
scale in this year. In addition, quick ratio was much greater than 1 and they fluctuated as

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Financial Analysis

the same pattern of current ratio, which shows that the risk of bankruptcy of AAM is low
and their financial situation is assessed as positive.
However, cash ratios in the five-year period decreased over 2 times and they were
not stable, showing that the firm might decide to use money to expand their scale instead
of holding much cash. Besides, cash flow ratio increased sharply in 2014-2017 period
(over 15 times), indicating that in 2017, the firm’s curent liabilities could be well covered
by the cash flows generated from its operations. In 2018, this index dropped remarkably
(nearly 7 times) to 1,1, showing that the cash flows generated from its operations still can
finance to curent liabilities but it is not stable.
4.3.2 Current assets turnover

Inventory turnover
2014 2015 2016 2017 2018
Industry 3,75 3,18 3,44 3,15 3,37
AAM 4,11 3,19 2,56 2,86 3,47

Inventory turnover decreased in the 2014-2016 period but this indicator was still
high compared to the industry index in 2014 and 2015. However, in 2016, it was 1,3 times
less than the industry index, showing that the speed of selling products was not positive
this year. In 2016-2018 period, it increased over the years and reached the peak of 3,47 in
2018, higher than the industry index, indicating that the speed of selling their products has
improved, which is a positive sign to the company.

Account receivables turnover

2014 2015 2016 2017 2018
Industry 5,21 3,07 2,86 3,18 4,01
AAM 8,14 6,6 4,62 4,02 5,60

Account receivable turnover decreased over the time and increased by 5,6 in 2018,
which indicates that debt retirement ability of AAM used to be good in 2014-2015 (about
2 times higher than the industry index) and it has been improved in 2018. However,

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Financial Analysis

compared to the industry index, AAM’s account receivable turnover was always higher,
showing that debt management of AAM is assessed as efficient.
4.3.3 Interest coverage ratio
As can be seen from Table 12, ICR of 2014-2016 period was far away from 1, which
witnessed that the firm was able to cover all their debt and AAM decided not to use debt
financing in 2017 and 2018. However, this index dropped sharply after 2014 (nearly 10
times) resulting from the dramatic decrease in profit before tax and the increase in interest
expenses, which proved that AAM borrowed more money but they did not operate
effectively in 2015 and 2016.

5. SOLUTION
𝑇𝑜𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑠𝑠𝑒𝑡𝑠
ROE =ROS × Assets turnover × × (1-T)
𝑇𝑜𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑒𝑞𝑢𝑖𝑡𝑦

ROE = ROS × Assets turnover × (1-T) × (1 + debt to equity ratio)

From these formulas, it is realized that ROA is affected by ROS, Asset turnover,
Self-fund ratio and Debt to equity ratio. ROE has direct relationship with ROS, Assets
turnover, debt to equity ratio
Therefore, to increase ROE, the company should increase profit margin, use more
financial leverage and improve asset turnover.
Firstly, AAM should use more financial leverage. Debt to equity ratio of the firm
over five years was quite low, especially the company did not use debt financing in 2017
and 2018, which led to low ROE compared to the data of the industry. In order to increase
ROE, AAM should try to borrow more money. We hope that in the next three years, ROE
of AAM would equal ROE of the industry in 2018 (26,71%). Therefore, in 2019, ROE
should increase by 7,5%, which means it would be 11,74%. Therefore, the debt to equity
ratio should be 2,04 (with the assumption that other elements remain the same).
Another way to improve ROE is increasing asset turnover. AAM is likely to
decrease total average assets by lowering current assets. We can decrease average total

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Financial Analysis

assets by cutting off trading securities. In another words, the firm should focus on their
main business field rather than outside investment.
In addition, ROE can be enhanced by reducing expenses or increasing sales. It
means that the firm should reduce selling expenses. It is possible because selling expenses
of the firm decreased over the years. In order to increase sales, AAM should loosen credit
policies by increasing the amount of account receivables or credit period.

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APPENDICES
Table 1 ASSET STRUCTURE ANALYSIS
2014 2015 2016 2017 2018
INDEX
Value % Value % Value % Value % Value %
Current
234.003.666.882 78,74% 270.531.281.331 84,03% 211.692.755.720 82,08% 196.300.575.712 78,03% 185.331.960.146 80,59%
assets
Cash & Cash
55.865.516.720 18,80% 27.955.052.472 8,68% 13.386.493.510 5,19% 13.656.304.758 5,43% 11.098.787.731 4,83%
equivalents
Short-term
financial 20.577.821.062 6,92% 74.711.410.174 23,21% 30.207.633.393 11,71% 76.447.726.000 30,39% 72.259.517.920 31,42%
investments
Short-term
53.712.660.151 18,07% 62.901.421.341 19,54% 68.008.187.406 26,37% 54.680.963.617 21,74% 31.109.921.341 13,53%
receivables
Inventories 99.315.976.914 33,42% 101.526.511.578 31,54% 96.580.328.481 37,45% 47.300.323.400 18,80% 65.189.400.109 28,35%
Other
current 4.531.692.035 1,52% 3.436.885.766 1,07% 3.510.112.930 1,36% 4.215.257.937 1,68% 5.674.333.045 2,47%
assets
Non-current
63.187.350.765 21,26% 51.402.484.926 15,97% 46.211.012.714 17,92% 55.260.017.809 21,97% 44.627.076.641 19,41%
assets
Long-term
5.800.000.000 1,95% 0 0,00% 0 0,00% 0 0,00% 0 0,00%
receivables
Fixed assets 44.935.304.822 15,12% 39.354.098.426 12,22% 34.402.626.214 13,34% 33.563.529.601 13,34% 33.002.665.287 14,35%
Long-term
assets 28.949.203 0,01% 0 0,00% 0 0,00% 128.101.708 0,05% 98.007.312 0,04%
progresses
Long-term
financial 10.688.386.500 3,60% 10.688.386.500 3,32% 10.688.386.500 4,14% 20.688.386.500 8,22% 10.688.386.500 4,65%
investments
Other long-
1.734.710.240 0,58% 1.360.000.000 0,42% 1.120.000.000 0,43% 880.000.000 0,35% 838.017.542 0,36%
term assets
TOTAL
297.191.017.647 100,00% 321.933.766.257 100,00% 257.903.768.434 100,00% 251.560.593.521 100,00% 229.959.036.787 100,00%
ASSETS

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Chart 1 ASSET STRUCTURE ANALYSIS

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Table 2 SOURCE OF FUND ANALYSIS

INDEX 2014 2015 2016 2017 2018
Liabilities 39.846.367.520 72.280.501.243 12.925.353.606 10.603.590.916 18.279.981.958
Owner's equity 257.344.650.127 249.653.265.014 244.978.414.828 240.957.002.605 211.679.054.829
Long-term resource 260.437.951.843 252.785.112.582 248.061.299.432 244.021.898.941 214.714.054.829
Temporary resource 36.753.965.804 69.148.653.675 9.842.469.002 7.538.694.580 15.244.981.958
TOTAL LIABILITIES
297.191.017.647 321.933.766.257 257.903.768.434 251.560.593.521 229.959.036.787
AND OWNER’S EQUITY
Debt ratio 13,41% 22,45% 5,01% 4,22% 7,95%
Self-fund ratio 86,59% 77,55% 94,99% 95,78% 92,05%
Long-term resource ratio 87,63% 78,52% 96,18% 97,00% 93,37%
Temporary resource ratio 12,37% 21,48% 3,82% 3,00% 6,63%

Table 3 LONG-TERM FINANCIAL BALANCE

INDEX 2014 2015 2016 2017 2018

Long-term resource 260.437.951.843 252.785.112.582 248.061.299.432 244.021.898.941 214.714.054.829
Owner's equity 257.344.650.127 249.653.265.014 244.978.414.828 240.957.002.605 211.679.054.829
Long-term assets 63.187.350.765 51.402.484.926 46.211.012.714 55.260.017.809 44.627.076.641
Net working capital 197.250.601.078 201.382.627.656 201.850.286.718 188.761.881.132 170.086.978.188
Long-term resource/Long-
4,12 4,92 5,37 4,42 4,81
term assets
Owner's equity/Long-term
4,07 4,86 5,30 4,36 4,74
asets

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Table 4 SHORT-TERM FINANCIAL BALANCE

INDEX 2014 2015 2016 2017 2018

Inventories 99.315.976.914 101.526.511.578 96.580.328.481 47.300.323.400 65.189.400.109
Short-term accounts receivable 53.712.660.151 62.901.421.341 68.008.187.406 54.680.963.617 31.109.921.341
Other current assets 4.531.692.035 3.436.885.766 3.510.112.930 4.215.257.937 5.674.333.045
Short-term liabilities (excluding
36.753.965.804 69.148.653.675 9.842.469.002 7.538.694.580 15.244.981.958
interest bearing liabilities)
Net working capital 197.249.701.078 201.382.627.656 201.850.286.718 188.761.881.132 170.086.978.188
Net working capital requirement 120.806.363.296 98.716.165.010 158.256.159.815 98.657.850.374 86.728.672.537
Net fund 76.443.337.782 102.666.462.646 43.594.126.903 90.104.030.758 83.358.305.651

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Table 5 ANALYSIS OF ASSETS USE EFFICIENCY

INDEX 2014 2015 2016 2017 2018

Net sale 439.016.740.568 349.631.008.741 274.778.205.874 224.189.186.844 218.263.890.048
Net sale and revenue 447.870.087.737 355.724.964.581 279.666.926.983 228.737.247.928 226.966.896.872
Average total assets 299.631.262.346 309.562.391.952 289.918.767.346 254.732.180.978 240.759.815.154
Average historical cost
106.565.034.406 106.963.105.161 107.173.581.184 108.461.461.851 111.572.997.513
of fixed assets
Average current assets 233.261.162.841 252.267.474.107 241.112.018.526 203.996.665.716 190.816.267.929
Asset use efficiency 1,49 1,15 0,96 0,90 0,94
Current assets
1,88 1,39 1,14 1,10 1,14
turnover
Fixed assets use
4,12 3,27 2,56 2,07 1,96
efficiency
Average days of
current assets 191 260 316 328 315
turnover

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Table 6 PROFITABILITY ANALYSIS

INDEX 2014 2015 2016 2017 2018

Average owner's equity 258.360.173.696 253.498.957.571 247.315.839.921 242.967.708.717 226.318.028.717
Average capital
261.453.467.089 256.611.532.213 250.423.206.007 246.041.599.187 229.367.976.885
employed
Average total assets 299.631.262.346 309.562.391.952 289.918.767.346 254.732.180.978 240.759.815.154
EBT 11.713.506.875 3.103.652.488 1.904.151.011 1.175.373.508 11.911.379.426
Interest expense 333.714.617 1.045.879.783 737.750.739 0 0
EAT 8.881.282.070 2.563.684.319 1.569.522.682 1.131.598.086 9.591.230.681
ROA (4/3) 3,91% 1,00% 0,66% 0,46% 4,95%
ROE (6/1) 3,44% 1,01% 0,63% 0,47% 4,24%
ICR 36,10 3,97 3,58 - -
ROCE 4,61% 1,62% 1,05% 0,48% 5,19%
EPS 796 226 129 95 881
P/E 17,59 48,67 73,64 110,5 15,4
RE 4,02% 1,34% 0,91% 0,46% 4,95%
BV 26.003 25.514 24.656 24.252 21.242

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Table 7 RETURN ON SALES

INDEX 2014 2015 2016 2017 2018

EBT 11.713.506.875 3.103.652.488 1.904.151.011 1.175.373.508 11.911.379.426
Total sales and
447.870.087.737 355.724.964.581 279.666.926.983 228.737.247.928 226.966.896.872
revenues
ROS 2,62% 0,87% 0,68% 0,51% 5,25%

Table 8 CASH FLOW BASED RATIO

INDEX 2014 2015 2016 2017 2018

Total revenue 439.016.740.568 349.631.008.741 274.778.205.874 224.189.186.844 218.263.890.048
Total assets 297.191.017.647 321.933.766.257 257.903.768.434 251.560.593.521 229.959.036.787
Net income 8.881.282.070 2.563.684.319 1.569.522.682 1.131.598.086 9.591.230.681
CFO 18.206.023.353 (2.575.108.132) (2.035.094.436) 57.140.442.047 16.775.750.106
Average number of common
9.935.701 9.935.701 9.935.701 9.935.701 9.964.949
shares of outstanding
Cash provided by operating
18.206.023.353 (2.575.108.132) (2.035.094.436) 57.140.442.047 16.775.750.106
activities
CF margin 0,04 (0,01) (0,01) 0,25 0,08
CF from operations to net
2,05 (1,00) (1,30) 50,50 1,75
income
CF per share 1832,38 (259,18) (204,83) 5751,02 1683,48
CF return on assets 0,06 (0,01) (0,01) 0,23 0,07
Net income to cash provided
0,49 (1,00) (0,77) 0,02 0,57
by operating activities

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Table 9 BUSINESS RISK ANALYSIS

INDEX 2014 2015 2016 2017 2018

1. Net sales 439.016.740.568 349.584.496.632 274.778.205.874 224.189.186.844 218.263.890.048
2. Contribution margin
197.557.533.256 157.313.023.484 123.650.192.643 100.885.134.080 98.218.750.522
(45% Net sales)
3. Profit before tax 11.713.506.875 3.103.652.488 1.904.151.011 1.175.373.508 11.911.379.426
4. Interest expenses 333.714.617 1.045.879.783 737.750.739 0 0
5. EBIT (2+3) 12.047.221.492 4.149.532.271 2.641.901.750 1.175.373.508 11.911.379.426
6. DOL (2/5) 16,4 37,9 46,80 85,8 8,2

Table 10 FINANCIAL RISK ANALYSIS

INDEX 2014 2015 2016 2017 2018

Profit before tax 11.713.506.875 3.103.652.488 1.904.151.011 1.175.373.508 11.911.379.426
Interest expenses 333.714.617 1.045.879.783 737.750.739 0 0
DFL 1,03 1,34 1,4 1,0 1,0

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Table 11 INSOLVENCY RISK ANALYSIS

INDEX 2014 2015 2016 2017 2018

Current assets 234.003.666.882 270.531.281.331 211.692.755.720 196.300.575.712 185.331.960.146
Cash and cash equivalents 55.865.516.720 27.955.052.472 13.386.493.510 13.656.304.758 11.098.787.731
Inventory 99.315.976.914 101.526.511.578 96.580.328.481 47.300.323.400 65.189.400.109
Account receivables 4.531.692.035 3.436.885.766 3.510.112.930 4.215.257.937 5.674.333.045
Short-term Account payables 36.753.065.804 69.148.653.675 9.842.469.002 7.538.694.580 15.244.981.958
Net cash flow from operation 18.206.023.353 (2.575.108.132) (2.035.094.436) 57.140.442.047 16.775.750.106
Current ratio 6,4 3,9 21,5 26,0 12,2
Quick ratio 3,5 2,4 11,3 19,2 7,5
Cash ratio 1,5 0,4 1,4 1,8 0,7
Cash flow ratio 0,5 (0,04) (0,2) 7,6 1,1

Table 12 INTEREST COVERAGE RATIO

INDEX 2014 2015 2016 2017 2018

Profit before tax 11.713.506.875 3.103.652.488 1.904.151.011 1.175.373.508 11.911.379.426
Interest expenses 333.714.617 1.045.879.783 737.750.739 0 0
ICR 36,1 3,97 3,58 - -

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No. Full Name Contribution (%) Signature Notes

1 25

2 25

3 25

4 25

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